Steel: Sailing in rough water - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Steel: Sailing in rough water

Jun 18, 2001

With a downturn in the global economy, the steel industry is facing tough times. Global steel consumption, which grew by 5.8% in FY01, is expected to grow 2.3% in the current year. As a result of the demand supply gap in the industry steel prices are on a downhill journey.United States, which accounts for around 15% of the world steel consumption, is expected to record a negative growth rate of 0.1% in the current year. Many companies in the US are facing a financial meltdown, which could further pressurize steel prices. After touching a low of US$ 180 per tonne in December, steel prices have bounced back to US$ 210 per tonne. However, the rally has now halted and the prices are unlikely to recover at least in the next six months, as there is an absence of growth in demand.

According to the World Steel Dynamics (WSD) production of steel is expected to fall by 2% to 829 m tonnes in the current year, as compared to a rise of 7% in the previous year. The decline in production could help steel producers in increasing product prices, particularly for value added steel products.

In the medium term, pressure on the industry could lead to acceleration in consolidation activity. Usinor of France and Luxembourg’s Arbed have already announced merger plans, as have NKK and Kawasaki, Japan’s second and third largest steel makers.

On the other hand, sustained demand from the infrastructure segment has resulted in an uptrend in domestic demand for steel. Finished steel production registered an impressive growth of 7.7% to 29.7 m tonnes in FY01. Consumption too rose by about 7%. Steel exports registered a growth of 9.5% despite a global downtrend. While SAIL’s production grew by 7.9%, Tisco’s production was up by 4.9%.

(Consumption in million metric tonnes)19992000Change 99-002001Change 00-01
Total Asia3113327.0%3464.0%
Australia & NZ76-6.0%6-4.8%
Middle East15167.3%161.2%
World Total7117525.8%7692.3%
Source: IISI

Fiscal year 2001-02 has started on a dull note for the Indian steel sector. Production has fallen by 1.8% in April 2001. The future outlook is not encouraging as reflected from the sliding growth rates in industrial production. The index of industrial production (IIP) registered a growth of just 2.7% YoY in April ’01 compared to 6.5% recorded in April ’00. The manufacturing sector witnessed a decline in growth rates by 440 basis points to 2.7% in April. The numbers are indicative of the slowing Indian economy, affected by the sluggish world economy. The Indian steel producers could be hit over the next six months, as demand remains at lower levels. However, recovery could come with a rise in domestic construction activity.

Equitymaster requests your view! Post a comment on "Steel: Sailing in rough water". Click here!


More Views on News

TATA METALIK Share Price Up by 5%; BSE METAL Index Up 1.5% (Market Updates)

Sep 28, 2020 | Updated on Sep 28, 2020

TATA METALIK share price is trading up by 5% and its current market price is Rs 533. The BSE METAL is up by 1.5%. The top gainers in the BSE METAL Index is TATA METALIK (up 5.3%).

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 28, 2020 (Close)